Customer, Lawson Software, hosting provider in legal dustup over ERP project

Health-care business services provider MedSynergies has sued Lawson Software and hosting company Velocity Technology Solutions over a rash of alleged problems with an ERP (enterprise-resource-planning) application project, but Lawson and Velocity say MedSynergies is just trying to get out of a contract it inherited through an acquisition.

Lawson and Velocity perpetrated a "flim-flam" against MedSynergies, according to a complaint filed earlier this month in U.S. District Court for the Northern District of Texas.

Lawson and Velocity "conspired to lure plaintiffs into onerous, long-term software, hosting and services contracts and then simply failed to perform," the complaint said. "When their software did not work, defendants piled up the services, charging hundreds of thousands of dollars in 'consulting fees' to fix the problems they themselves created."

But the software still doesn't work, leading MedSynergies to file suit in order to recoup its money, the filing added.

The project dates to 2008, when MedSynergies' PhyServe subsidiary sought to replace its human-resources software, and Lawson was one of the vendors in the running, according to the filing. Lawson told the company that it and Velocity could complete the implementation in six months, "despite the fact that a 'standard' Lawson implementation takes twelve to eighteen months," the complaint said.

PhyServe "relied on Lawson's and Velocity's statements and marketing materials and accepted Lawson's bid with little negotiation," signing deals with both in October 2008, the complaint added.

The work was supposed to start immediately, with a system "go-live" date of April 2009, but those plans quickly went awry, as Velocity and Lawson didn't get started until March, according to the complaint. In addition, PhyServe's existing Ceridian human-resources system was supposed to be run in parallel with Lawson for a while in order to work out any kinks.

"This did not happen," the complaint said. "Instead, Lawson and Velocity merely ran a number of mock payrolls, which could only show whether the software ran rather than whether it ran properly."

MedSynergies didn't learn of the problems until shortly after it purchased PhyServe in December 2010, according to the complaint. The system "simply [does] not work," it said. The alleged problems include erroneous tax forms, "consistently wrong" retirement plan information and payroll records that "never match expected accounting records."

Meanwhile, consulting fees have added up to "substantially more" than the US$1.1 million initially promised, "and have provided no benefits," it said.

Moreover, one Lawson consultant allegedly told MedSynergies that the project was not fixable and would have to be scrapped and re-implemented.

But Lawson and Velocity have filed motions that would stay the suit and order the claims be settled through arbitration.

MedSynergies' case is "dependent on concocted allegations and frivolous causes of action," Velocity said in an Oct. 11 filing.

"For years, PhyServe was satisfied with the service provided by Velocity, using the software regularly and even purchasing optional upgrades and additional packages," the company said. However, after MedSynergies bought PhyServe, it sought to "transition the remaining PhyServe employees who had been responsible for working with the Velocity-managed systems to existing MedSynergies systems, and it now desires to exit the contract with Velocity without paying the mandatory termination fee."

While Velocity is prepared to defend itself in "the proper forum," that would not be a federal lawsuit, as its contract with MedSynergies contains "a sweeping arbitration clause," it added.

Lawson made similar statements in filings made last week.

"We believe this lawsuit has no merit and we will vigorously defend our position through the proper legal channels," Lawson spokesman Joe Thornton said via e-mail on Monday.

A representative for Velocity didn't immediately respond to a request for additional comment.

This is far from the only ERP project to end up in court of late, with vendors including Oracle, SAP and Epicor, among others, involved in various disputes.

Sometimes, vendors can suffer unfairly, said one expert.

"In private moments, enterprise software executives will complain about the damage done to their brand reputation as a result of poor implementation services by third parties," said Michael Krigsman, CEO of Asuret, a firm that helps companies run successful IT projects. "This case provides a concrete example of that allegedly happening."

However, the case is not that clear-cut because both Lawson and Velocity allegedly made certain claims about what the customer could expect, he added.

In general, problems can be avoided by making sure the right expectations are set, according to analyst Ray Wang, CEO of Constellation Research. "Before you select a vendor, we recommend clients work out the use cases they expect the software to support ahead of time," he said. "This blueprinting phase is key to success and helps outline the roles, responsibilities and corrective action in order to create a successful project."

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris's e-mail address is Chris_Kanaracus@idg.com

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